The Denver-area housing market was ranked fifth in May by Case-Shiller.
Denver-area homes gained 3.7 percent in the year ending in May, shows the closely watched Case-Shiller report released today, the highest percentage gain in about two years.
The last time the Denver-area metropolitan statistical area showed a bigger percentage gain was the 4.4 percent recorded in April 2010, when the federal government’s home buying tax credits were expiring.
A year ago, the Denver-area housing market was down 3.3%, according to the S&P/Case-Shiller Home Price Indices.
Denver’s most recent performance was good enough to rank it No. 4 of the 20 MSAs tracked by Case-Shiller.
Phoenix led the nation with a whopping 11.5 percent year–over-year increase. It was followed by Minneapolis with a 4.7 percent gain,Dallas with a 3.8 percent gain and Denver.
May marked the 13th consecutive month that Denver ranked in the top five cities tracked by Case-Shiller.
Denver is No. 1 in Gary Bauer’s book.
“i am ready to raise the banner that Denver is No. 1. We are the hottest market in the country, on a consistent basis,” Bauer said. “Given how low Phoenix had fallen, it is no surprise that it is coming back. But Phoenix is not anywhere near as a strong a market as Denver. It is no where close to Denver.”
Lane Hornung, CEO, President and Co-founder of 8z Real Estate and COhomefinder.com, said the latest Case-Shiller report shows that Denver’s housing market is well past the bottom.
“May’s Case-Shiller figures should lay to rest any concerns that Denver will experience a double dip in home prices in 2012 as many were predicting,” Hornung said. “We are now 6.9 percent above the post peak low of Feb 2009 and the rate of price gains is accelerating,” Hornung continued.
“Based on what we are seeing in the market now, I expect this rapid gain in home prices to taper off somewhat in the second half of the year, but not before a very strong Denver Case-Shiller number for June is reported in August. When the dust settles at year-end, the Denver market should hold onto solid price gains of 3 to 5 percent over 2011 values.”
Peter Niederman, CEO of Kentwood Real Estate, said the latest Case-Shiller report continues a trend of Denver being in the top five markets.
“Other markets are now starting to catch up,” Niederman said.
Niederman noted that Case-Shiller is always 60 days behind the market.
Locally, he said that showings, a leading indicator of home-buying activity, was down 20 percent to 25 percent in early July, a month earlier than the typical seasonal downturn in people shopping for homes.
He said part of it could be the unseasonably hot weather the area suffered in July.
“A lot of rain and snow will keep people from jumping in their cars and looking at homes, so it is possible that with this drought and temperatures in the 90s and 100s could be causing a little bit of the slowdown in showings,” Niederman said.
Uncertainty regarding the Presidential election in the fall, worries about the economy, and the economic tumult in Europe also might be making people a bit skittish about signing on the dotted line, he said.
“We need to bring the unemployment rate down and consumer confidence still needs to rise,” Niederman said.
On the bright side, mortgage rates have never been lower.
“When you can get a conforming 30-year-fixed-rate loan at 3.5 percent, and a non-conforming loan at about 4 percent, you are not just talking about low rates by historic standards – you are talking about all-time low rates,” Niederman said.
Niederman said that while luxury home sales have picked up substantially, that hasn’t always been reason for the seller to cheer.
He pointed to an example of somebody who paid $2 million for a home and sold it for $1.5 million.
“Total sales might be up and total dollar volume might be up, but not every sale is a good sale, at least from the seller’s perspective,” Niederman said. “Maybe the buyer is getting a good deal, but it can be very painful for the seller.”
Scott Webber, CEO and president of Fuller Sotheby’s International Realty, said while the Case-Shiller report is “great news,” for the Denver area, the market “still is a little inconsistent.”
While his company’s business is up about 30 percent on a year-over-year basis, he said there are still soft spots in some parts of the market.
“You do have this circle of demand and it is broadening every week, every month,” Webber said. “But I do have to chuckle over this over-generalization. Not every home gets multiple offers. People are not standing in line to buy every home. There is not a feeding frenzy across the board. The media loves to portray the market in one way. While it is good news that the overall market is improving, you don’t have to go too far out to still find a lot of hardship. When you start going farther out in the suburbs, you find a still-soft market. We are not out of the woods yet. There are still a lot of homeowners out there suffering.”
Nationally, the housing market showed signs of improvements.
“With May’s data, we saw a continuing trend of rising home prices for the spring,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “On a monthly basis, all 20 cities and both composites posted positive returns and 17 of those cities saw those rates of change increase compared to what was observed for April. Seventeen of the 20 cities and both composites also saw improved annual rates of return.
“We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns. However, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.
“The 10- and 20-City Composites were each up 2.2 percent for the month and recorded respective annual rates of decline of 1.0 percent and 0.7 percent, compared to May 2011. While still negative, these annual changes are the best we’ve since in at least 18 months.
“Taking a closer look at the cities, Phoenix again posted the best annual return. Average home prices in that region were up 11.5 percent versus May 2011. It was one of the hardest hit cities in the collapse, and prices are still more than 50 percent below their June 2006 peak, but the past five months have been positive for that market.
“Miami and Tampa are two other Sunbelt cities that were hard-hit in the downturn, but are now showing positive annual rates of change. Boston, Charlotte and Detroit, on the other hand, saw their annual rates of return deteriorate compared to April, even though prices rose over the month of May. Las Vegas posted both a positive monthly change in May and saw an improvement in its annual return; that said, the market is still more than 60 percent below it August 2006 peak.
“June data for existing home sales, new home sales, housing starts and mortgage default rates were a bit mixed, but all are better than their year-ago levels. The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months.”
MSA Change from January 2000 October-November (non-seasonly adjusted) 1-Year Change from November
Atlanta -3.32% 0.1% 7.6%
Boston 53.74% -0.9% 2.3%
Charlotte 15.41% -0.3% 5.1%
Chicago 13.35% -1.3% 0.8%
Cleveland 0.68% -0.8% 1.8%
Dallas 20.55% -0.1% 5.7%
DENVER 34.50% 0.4% 7.8%
Detroit -19.67% -0.3% 11.9%
Las Vegas 0.56% 0.4% 10.0%
Los Angeles 75.58% 0.4% 7.7%
Miami 51.13% 0.8% 9.9%
Minneapolis 26.41% 1.0% 11.1%
New York 62.86% -1.1% -1.2%
Phoenix 24.16% 1.4% 22.8%
Portland 42.13% -0.2% 6.7%
San Diego 63.58% 0.9% 6.7%
San Francisco 46.23% 1.4% 12.7%
Seattle 42.53% 0.5% 7.4%
Tampa 33.77% -0.2% 6.8%
Washington, D.C. 89.11% -0.6% 4.4%
Composite-10 58.28% -0.2% 4.5%
Composite-20 45.82% -0.1% 5.5%
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Over the past few years of watching Case-Shiller, what I’ve learned is that if you are on the top of the list for a while, your market will eventually crash hard.